When the production possibilities frontier is bowed outwards, the opportunity cost of producing more of one good
A) cannot be determined.
B) remains constant.
C) decreases in terms of the amount foregone of the other good.
D) increases in terms of the amount foregone of the other good.

Question

Quizplus · Accepted Answer

When the production possibilities frontier is bowed outwards, it means that the opportunity cost of producing one good increases as more of that good is produced. This is because resources are not equally productive in the production of both goods - some resources are better suited for producing one good while others are better suited for producing the other. So as more resources are shifted towards producing one good, the opportunity cost of producing an additional unit of that good will increase in terms of the amount of the other good that must be given up. Therefore, the correct answer is D - the opportunity cost of producing more of one good increases in terms of the amount foregone of the other good.

When the Production Possibilities Frontier Is Bowed Outwards, the Opportunity